The Governmental Accounting Standards Board (GASB) has issued Statements No. 43 and 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, which addresses how state and local governments should account for and report their costs and obligations related to postemployment healthcare and other nonpension benefits. These new standards require that Municipalities obtain an actuarial valuation every two years on the OPEB plans. While there is no requirement to actuarially fund the OPEB plan, there is a requirement that forces Municipalities to accrue an expense on the government wide financial statements equal to the “annual required contribution” determined by the actuaries. The Municipality’s OPEB plan, as currently administered, will fall under the requirements of GASB statement 45 and the Municipality will be required to implement this standard in fiscal year 2007-2008 (Phase I), 2008-2009 (Phase II) or 2009-2010 (Phase III). The phases are defined exactly as they were for GASB 34 implementation. If the Municipality decides to create an irrevocable trust to account for the pre-funding of the OPEB requirements, they will fall under the requirements of GASB 43 and the Municipality will be required to implement this standard one year earlier than what would be required under GASB 45.
Statement 45 also establishes disclosure requirements for information about the plans in which an employer participates, the funding policy followed, the actuarial valuation process and assumptions, and, for certain employers, the extent to which the plan has been funded over time.
This is a very brief overview of this new Statement and the effect that it will have on your Municipality. We want you to be aware of these new requirements and assure you that we will be available to assist with implementation.